Key Points:
- The Standard & Poor’s 500 index lost 4.6% in the first quarter, marking its worst quarterly performance since 2022.
- Yields on the 10-year Treasury jumped to 4.44% while gold prices plunged 13% in a single month.
- Financial experts warn that wealthy families might cut their spending, which could trigger a major economic recession.
- Advisors fear stagflation is approaching, with inflation likely staying above 4% due to rising energy costs.
Investment advisors report that mounting global problems cause heavy anxiety for their clients. As the second quarter begins, investors struggle to predict how the war with Iran, rising energy prices, and private credit issues will impact their portfolios. Despite a massive rally on the final trading day, U.S. markets still closed the first quarter with their worst performance since 2022. The Standard & Poor’s 500 index posted a 4.6% loss over the first three months.
This deep anxiety highlights a major shift in how financial professionals view risk. For years, advisors relied on standard asset diversification to protect clients’ money. Now, constant economic headwinds leave people doubting whether those historical patterns will work today. Mark Stancato, an advisor at VIP Wealth Advisors in Georgia, noted that markets easily handle bad news but completely fall apart when they lack clear policy direction. He sees exactly that happening right now, creating severe equity volatility and making future outcomes nearly impossible to model.
The first quarter brought brutal weakness across nearly all asset classes. Both stocks and bonds suffered heavy losses together. Yields on the 10-year Treasury bond shot up from 4.01% in early March to a high of 4.44% by the end of the month. Even gold failed to act as a haven for nervous investors. The precious metal dropped 13% in March alone, suffering its worst monthly decline since October 2008.
Lisa Kirchenbauer from Omega Wealth Management in Virginia called this environment one of the toughest economic situations she has ever witnessed. Meanwhile, Jim Carroll, a senior wealth advisor at Ballast Rock Private Wealth in South Carolina, noted that intraday volatility spiked significantly during the first quarter. However, he mentioned that the overall market declines remained somewhat orderly despite the daily chaos.
Matt Dmytryszyn, chief investment officer at Composition Wealth, worries these combined economic headwinds will change how wealthy families behave. He fears high-net-worth clients will drastically reduce their spending, which would deal a massive blow to the broader economy. Dmytryszyn warned that current growth drivers could easily stall. If that happens, the stock market will rely entirely on productivity gains from artificial intelligence and spending by high-income consumers to stay afloat.
Dmytryszyn further outlined a worst-case scenario where those specific growth drivers fail. He predicted that such a failure would trigger a brutal two-phase decline in the equity market. The first drop would stem directly from the fear and economic fallout of the war with Iran. A severe U.S. economic recession would then drive the second downward phase.
Other advisors fear a much rarer economic condition called stagflation, in which high inflation coincides with stalled economic growth. David Haas of Cereus Financial Advisors in New Jersey expects inflation to stay stubbornly high. While he does not expect inflation to reach 7%, he confidently predicts it will hover above 4%. Haas believes high oil prices and broken supply chains will drastically slow economic growth, bringing the country dangerously close to a full-blown recession.
The fact that stocks and bonds fell simultaneously deeply worries financial experts. The situation reminds many advisors of 2022, when investors found absolutely nowhere to hide their money. Jon Ulin of Ulin & Co Wealth Management stated that this simultaneous drop destroys the traditional 60/40 portfolio cushion that investors trusted for decades.
The overwhelming number of global and economic issues leaves both advisors and clients struggling to keep up. Kirchenbauer specifically noted how the extreme uncertainty heavily impacts her clients. She expressed deep concern because many of her clients simply stopped replying to her emails and phone calls. She wonders if the constant barrage of bad financial news has left them numb, overwhelmed, or completely petrified.
